A quiet ten and still more hope

Sometime toward the end of 2003, a landmark quietly passed us by. Someone,
somewhere, bought the ten millionth PC in India.

Dataquest had marked the 5 millionth PC in December 2000. India had taken 20
years to reach the first five million, and it took just three years to double
that to ten. That’s impressive.

In a sense, it’s not a bad thing that it passed us by quietly. It’s
premature to celebrate it wildly. For one thing, this seemingly impressive
figure of ‘ten’ adds up to one PC for more than a hundred people.

For another, as I have pointed out before, our giant $18 billion Indian IT
industry pie has a shrinking domestic slice… from 87 percent in 1990 to 33
percent this year (ending March) and 31 percent next year. And then, there’s
the abysmal notebook usage in India, with notebooks at 2 percent of PC sales,
the lowest in the world.

Yet this, as I said in our new year issue, is a year of Hope. Duty cuts in
the first week of the year helped drop effective import-related duties on full
PCs and notebooks from 39 percent to 19 percent and on cellphones, from 14
percent to 5 percent. Both got cheaper. All this en route to zero-duty, WTO
2005.

In his tearing hurry ahead of the elections, the finance minister did ‘overlook’
key areas, making, for instance, imports of built-up units cheaper than
component imports. That made it unviable to manufacture here–and most PCs are
indeed assembled locally. Later clarifications addressed the issue: CVD drops on
microprocessors and storage units too.

But the real hope and likely excitement this year lies in the notebooks
segment.

Notebooks, previously in the premium Rs 1 lakh-plus-slot, were anyway quickly
entering the Rs 50-75k price zone. Now come the cuts, and still more
competition. And an interesting clause that allows individuals to walk in
through Customs with new notebooks in their baggage–at zero duty. For that
reason too, we could see some quick drops in the price differential between
India and the US, a gap that is not due to duties alone…

And finally, there’s much excitement on the connectivity front. Apart from
the rapid rise of domestic broadband (with all-inclusive, sub-Rs 1,000 voice and
data packages), there’s wireless. CDMA handsets are a great way to connect, at
home or in your car. And vendors are rapidly launching wireless-enabled
notebooks, even printers. So I wouldn’t be surprised if notebooks cross 5
percent of PC sales in 2004-05.

With good progress on the pricing front, the industry has its work cut out in
2004: Convince the government that it’s a stupid idea to continue to choke
Wi-Fi to death.